U.S. Army paid bonuses to KBR despite questions

WASHINGTON (Reuters) - The U.S. Army paid "tens of millions of dollars in bonuses" to KBR Inc, its biggest contractor in Iraq, even after it concluded the firm's electrical work had put U.S. soldiers at risk, according to a source close to a U.S. congressional investigation.

The Senate Democratic Policy Committee plans to hold a hearing on Wednesday to examine KBR's operations in Iraq, and question why the Army rewarded the Houston-based company.

The panel says KBR has been linked to at least two, and as many as five, electrocution deaths of U.S. soldiers and contractors in Iraq due to "shoddy work."

Investigators believe hundreds of other soldiers may have received electrical shocks, the source added. The Army is investigating.

The company denies responsibility for any of the electrocutions, saying it is proud of its work and that its employees make great sacrifices to get the job done.

KBR was part of Halliburton Co until two years ago. Former Vice President Dick Cheney served as Halliburton's chief executive from 1995 to 2000, when he became George Bush's running mate.

During the Bush administration, some critics claimed Cheney's deferred compensation from the company represented a conflict of interest and questioned Halliburton's winning of lucrative government contracts in Iraq.

Military reports have criticized KBR's work in Iraq in recent years. Yet afterward, the company received "tens of millions of dollars in bonuses," said the source, who declined to be identified.

"We want to know why," the source said.

The military was invited to send a witness to testify at Wednesday's hearing, but the committee agreed to let it submit a written statement instead, the source said. Witnesses who are expected to attend include a former KBR electrician.

On Tuesday, the Army had no immediate comment when asked about the bonuses.

THREAT OF FIRE

A September 30, 2008, letter to KBR from an officer in the Defense Department's Defense Contract Management Agency had harsh words for the company.

"We cannot overemphasize the significance of the lack of sustained electrical support services being provided by KBR in Iraq to maintain the minimum life, health and safety standards in support of our warfighters," wrote Captain David Graff, an agency commander.

A February 2007 report by the agency also raised concerns about KBR and its subcontractors in Iraq -- while acknowledging the difficulty of working in a war environment.

"Primary safety threat, theater wide, is fire due to the inferior 220 electrical fixtures found throughout Iraq," it said. "Improper installation, substandard equipment purchases (such as light fixtures) and heavy usage appears to be the three primary causes of these fires."

U.S. lawmakers have raised concerns about the U.S. military's increased use of private contractors in Iraq and Afghanistan and have said KBR and other companies should be held accountable.

KBR spokeswoman Heather Browne said, "KBR remains proud of the work it performs in Iraq."

"We remain committed to engaging in a transparent and more importantly, a fact-based dialogue on this issue while pledging continued full cooperation and support to the military."

The Senate Democratic Policy Committee is the research arm of the Senate Democratic leadership and often conducts investigations of its own.